Trump casts doubt on success of China trade talks

President Donald Trump said Thursday he doubted high-level trade talks with China this week would be successful because the Chinese have been treated too easily by past administrations. But he also struck a more optimistic tone in the same set of comments.

“The reason I doubt it is because China has become very spoiled,” Trump told reporters ahead of a meeting later Thursday with Chinese Vice Premier Liu He, who is leading the delegation in Washington for talks aimed at averting a trade war.

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“The European Union has become very spoiled, other countries have become very spoiled because they’ve always gotten 100 percent of whatever they wanted from the United States,” Trump said.

Later he modified his comments, saying he believed the United States and China would be happy with their trade relations because of his tough approach.

Thursday’s face-to-face meeting with Liu shows Trump's great interest in “trying to reach some remedies regarding unfair and illegal trading practices," Larry Kudlow, director of the National Economic Council, told reporters earlier. "That's what we want."

Heading into this week's meetings, China has indicated it would ease up on U.S. agriculture if the Trump administration rolls back criminal penalties on Chinese telecommunications giant ZTE - something Trump has already signaled he is willing to do, despite protests from both Republican and Democratic members of Congress.

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Trump acknowledged he told Chinese President Xi Jinping he would look at easing the current 7-year ban on ZTE doing business with American companies after it was recently caught violating the terms of $1.19 billion penalty agreement announced last year. But he also defended his administration’s handling of the case.

“Don’t forget it was my administration, with my full knowledge, that put very, very strong clamps on ZTE,” Trump said. “It wasn’t President Obama. It wasn’t President Bush. It was me.”

However, the investigation that led to the record fine on ZTE was started during the Obama administration, even though the penalty for making illegal sales to Iran and North Korea was announced early in Trump’s tenure.

Obama administration officials said they spent two years making the case and were prepared to impose a $1.3 billion fine, but the Trump administration scaled it back.

“They did very bad things to our country. They did very bad things to our economy,” Trump continued. “The one thing I will say they also buy a very large portion of the parts for the phones that they make … from the United States. That’s a lot of business.”

“But anything we do with ZTE [is] just a small component of the overall deal,” Trump said. “I can only tell you this, we’re going to come out fine with China. Hopefully, China’s going to be happy. I think we will be happy.”

However, the House Appropriations Committee on Thursday unanimously approved an amendment to keep the sanctions in place, in one of sign of the difficulty Trump might have satisfying Xi on the issue.

Sen. Jeff Flake (R-Ariz.) also said Trump’s decision to use the sanctions on ZTE as a bargaining chip in negotiations with China was “deeply troubling.”

“In essence, ZTE has repeatedly engaged in malign activity by deliberately misleading the government for years, all while attempting to deliver American technologies into the hands of state-sponsors of terrorism,” Flake said in a speech on the Senate floor.

Some observers fear that Trump — after promising to push for major changes in China’s industrial policies that put American companies at a disadvantage — is prepared now to settle for a short-term package aimed at significantly reducing the U.S. trade deficit with China, which increased last year to a record $375 billion.

Liu appears set to offer a two-year $200 billion-plus deficit reduction plan focused heavily on purchases of U.S. farm goods and energy products, but that would also shower dollars on as many as 20 other industry sectors, one source familiar with the talks said.

“It’s shaping up to be the art of the bad deal," the source said. "The impression is the administration is caving or folding its tent after revving things up quite a bit."

Liu’s visit comes as the Trump administration is moving ahead with plans to impose tariffs on around $50 billion worth of Chinese goods to pressure Beijing to do more to stop theft of American intellectual property and to change policies and practices that require U.S. companies to transfer technology to do business in China.

China has responded to Trump's tariff threat by vowing to strike back by raising duties on about $50 billion worth of agriculture, chemical and other goods.

In addition, Beijing has already imposed duties on about $3 billion of U.S. farm products, steel and other goods in response to Trump's decision to slap an additional 25 percent duty on Chinese steel and 10 percent duty on Chinese aluminum.

U.S. officials initially told the Chinese that they’d be open to granting some relief from the pending tariffs in exchange for a commitment to reduce the trade deficit with China by $200 billion over two years, an administration official said Wednesday.

But the Chinese have countered with a proposal to buy $150 billion in U.S. products instead, though the talks are still very much in flux, the official said.

Neither the White House or the Treasury press office would comment on the prospects for the two sides to reach a deal that primarily involves Beijing writing a series of checks to make Trump happy, without addressing the systemic issues that drove Trump to threaten tariffs.

However, Kudlow indicated the U.S. still had a substantive list of demands it want Beijing to address.